What Insurers Can Learn From Amazon's Customer Model

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When Jeff Bezos talks business, the business community tends to listen. The founder, chairman and CEO of Amazon.com appeared on the Charlie Rose television show this past week, and his opening statement may be a familiar one to insurers: “Unlike most companies that are obsessed with the competition, we have an absolute obsession with the customer,” he said.

Having built Amazon.com into the largest online shopping retailer and ultimately the world’s largest internet sales website, Bezos’ personal wealth, as of October 30, is estimated to be $67 billion, ranking as the second richest person in the United States behind Bill Gates and the third richest in the world on Forbes’ The World's Billionaires list. But to hear Bezos tell it, a focus on long-term results is more important than a focus on short-term distractions, such as quarterly earnings reports.

Obviously, his business philosophy is working, and he says it’s tied to several specific tenets; being able to understand customer requirements and deliver as quickly as possible, take pride in operational excellence, take risks to innovate, and sell everything to everybody.

Let’s compare these tenets to the insurance industry. Across all lines of business, knowing your customer and what they want, and then delivering products and services quickly is proven to improve engagement, retention and customer satisfaction. Bezos started with a focus on customer experience and worked backwards, constantly focusing on his vision of growing the customer relationship. To improve on this, he launched Amazon Prime, an annual membership program that guarantees free shipping for qualified purchases, reducing customer friction, increasing the customer’s propensity to purchase more and improving customer experience with each shipment.

Taking pride in operational excellence speaks volumes to the technology challenges being faced by many insurers as they evaluate aging systems that can’t perform to the customers’ requirements, and the mechanism by which these systems operate. It also applies to the challenges associated with being able to hire and develop the best possible talent to strategize and execute a technology vision related to continuous improvement in all areas of the organization, which, of course, is no easy task when it comes to retiring legacy knowledge workers.

Amazon has taken criticism for promoting relentlessly high standards within its leadership ranks, but has a formal process by which leaders are responsible for bringing others up via coaching and sponsorship. “We are big on finding the root cause of defects in people and operations,” Bezos told Rose.

The insurance industry, by its nature, is risk averse, so innovation, at least until recently, has not been our industry’s strong suit. By comparison, Amazon’s ability to take risks to innovate is legendary. In 2006 the company launched Amazon Web Services (AWS) as a standalone business. By Q2 2016, AWS experienced $2.5 billion in revenue.

“If you do something along innovation lines you typically get about two years of runway before competition catches up with you,” said Bezos. This statement tends to fly in the face with his “obsession with the customer vs the competition” statement.

However, Amazon founded AWS for the customer, not for Amazon.com. “With AWS we got seven years on the runway, which allowed us to build an advantage with infrastructure, features and services. In the process, we realized Amazon.com needed this—we became our own customer.”

The “sell everything to everybody” tenet may have the least relevance to the insurance industry, but its boldness in spirit and approach is worth considering for insurers putting upsell and cross-sell plans in play. And, as emerging disruptors such as Lemonade and Trov enter the market, this tenet is causing insurers to rethink what and how they sell. Bezos insists that it’s the long-term view of the way Amazon conducts business that will determine the company’s destiny. Insurers might be well advised to embrace Amazon’s long-term view, which holds customer loyalty at the top.

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